2/13/2006 @ 12:00AM

Venture Professor

Yoshito Hori has an uphill battle giving young Japanese entrepreneurs the lowdown on startups.

Yoshito Hori is out to change Japan’s reputation as a venture capital wasteland. He has his work cut out for him. Japanese startups attracted less than $1.8 billion in domestic seed capital in 2005, according to a survey of 105 funds by the Venture Enterprise Center, a government research firm in Tokyo. That means that Japan, with an economy half the size of the U.S.’, consumed one-twelfth as much venture capital. Singapore got $1 billion from U.S. venture capitalists, ten times what Japan got.

But Hori, the 43-year-old founder of Globis Capital Partners and dean of Tokyo’s Globis Management School, insists that Asia’s leading economy has sharp minds with lively ideas worth funding. All they need are the two things that he is providing: money and Western business savvy. “Japan had a very rigid, stable society [ten years ago],” says Hori. “The mentality now is so much different. Entrepreneurs are respected.” (Excepting Takafumi Horie, the Web entrepreneur and alleged stock manipulator who was recently arrested.)

Corporate profits are almost double the levels reached during Japan’s economic bubble in the 1980s, according to Merrill Lynch, and the Nikkei 225 gained 40% in 2005 to end at its highest level in more than five years. The emergence of what Hori calls “the new Japan” is helping put the nation back on the investor map.

Things were much worse when Hori graduated from Harvard Business School in 1992 and returned to Japan to resume his job at trading company Sumitomo Corp., where he oversaw the export of petrochemical plants. His home economy was in shambles. But amid the gloom Hori set two goals: Establish a venture fund and open an academy that would train a fresh generation of Japanese entrepreneurs in the arts of U.S.-style business.

Ten years later Hori has something to brag about. His Globis Management School has enrolled 2,000 students this term, most of them part-time, but 10% are actively running their own businesses. Employees from some 250 corporate clients, including titans of the old Japan economy like phone giant NTT, come during the day for brush-up classes taught by professionals fresh out of the business world. Last year Globis won accreditation to become the first company in Japan to open a graduate school for business. Sixty students will pay the $25,000 tuition for the two-to-three-year course beginning April, up from 28 enrolled last year in an M.B.A.-equivalency program.

“My vision is to become the number one business school in Asia and the number one venture capital firm,” Hori says.

He’s done well on the money front, too, having first raised a $5 million venture fund in 1996, Globis Capital Partners, with $1 million from Isao Okawa, the late chairman of Sega Corp. Three years later Hori joined with Apax Partners to raise a $187 million fund. Hori is currently raising a third fund.

In 1999 Globis and Apax stumped up $3.5 million to begin Works Applications, a maker of accounting software that has mushroomed to 1,000 employees and sales of $100 million (Forbes Asia, Nov. 28). The backers made 11 times their money when the company went public in 2002.

In August 2000 Globis invested $8.7 million in Gonzo Digimation Holdings, a producer of anime TV shows, including Afro Samurai, set to air this year on American cable channel SpikeTV. Revenue is expected to reach $70 million in the fiscal year ending in March, up from $39 million last year. Net income should double to $5 million. Since Gonzo first listed on Japan’s Mothers exchange for high-growth emerging stocks in November 2004, its shares have gone from $2,543 to $4,771. Globis’ stake has doubled to $17.3 million.

Globis’ latest investments, most of them slightly below $1 million, include Clara Online, a provider of low-cost data centers; Gree, a social networking Web site; and II-life, which provides home renovation services for pensioners.

Hori hopes his venture activity will attract higher-caliber students to the Globis M.B.A. program. Those with good ideas have every opportunity to “head upstairs” to Hori’s venture fund and make a pitch. The school occupies the first three floors of an office building in central Tokyo, with the venture funds on the two floors above.

Kenichi Nomaguchi, 30, has been studying at Globis for the past two years. He owns three restaurants at Tokyo’s Haneda and Narita airports and thinks he’s developing a winning idea: a chain of restaurants in smaller, less cosmopolitan U.S. cities that will attract diners by offering food that he says will be better than the “bland” fare they’re used to.

The California-born Nomaguchi, who wakes up every day at 5:00 a.m. to cram in a couple of hours of study before heading to work, has been upstairs to pitch Hori before. He wanted money to build a U.S.-style retirement community at the base of Mount Fuji to house Japan’s swelling ranks of retirees. Hori shot it down; old folks in Japan still tend to live with their children.

Hori advises his student-entrepreneurs to start small, just as he did. With $7,000 of his own money he rented a classroom, bought course materials and began his first classes. He tried but failed to persuade Harvard to let him open a franchise in Japan, though Harvard did agree to sell him the same famous case studies its professors use to teach their courses.

As well as Hori has done, he has far to go. Based on the return on investment that graduates can expect from their tuition, no Japanese institutions make Forbes’ top ten list of non-U.S. business schools. M.B.A. Programs, a Web site that provides information on schools, puts Tokyo’s Hitotsubashi University in eighth position in Asia, well behind better-known rivals in the region, including the China Europe International Business School in Shanghai and the Indian Institute of Management in Gujarat. For one-year courses Forbes ranks Insead, which has campuses in Singapore and France, as having the top overseas M.B.A. program.

Hori touts his school’s growing reputation–a ranking of Japanese business schools in 2004 by the Nikkei Sangyo business newspaper put Globis in third place–as a sign that at least at home he is closing in on his rivals.

One day, says Hori, he’ll have campuses in four of Japan’s biggest cities that offer both Japanese and English-language M.B.A.s. A separate facility tucked away somewhere in the mountains will cater to students seeking a scenic backdrop for their studies. And those 20,000 Japanese that have gone through Globis will be back to teach the secrets of success.